After a tense few days, the OPEC Vienna June meeting concluded on a successful note with all parties – Russia and Saudi Arabia on the one hand and Iran, Venezuela, and Iraq on the other – claiming that they can live with the final agreement made. However, the devil is in the details and the final communiqué was a masterful document in ambiguity. All things considered, Saudi Arabia with Russian support did a pretty impressive job in the messaging of OPEC meeting to satisfy sharply juxtaposed demands.
The maths first . Despite the nominal one million bpd of added crude supply cited, the actual additional crude that OPEC plus will be bringing to market is more likely to be between 600,000bpd to perhaps as much as 800,000 bpd . More importantly, Gulf Arab producers are indicating an implicit near-term price cap target around $70-75 a barrel, subject to review at OPEC’s extraordinary meeting in September in Algiers to celebrate the two-year OPEC production agreement that has set the stage for managing output .
Best effort to boost output
Review in September
The agreement today will be reviewed at the extraordinary OPEC meeting in September. Output could be adjusted up, or down, depending on the review of global demand and supply. In particular, further declines in Libyan and Venezuelan output could easily offset increases from Saudi Arabia and Russia. That could mean the need for a considerable output increase by Saudi Arabia, especially as the imposition of the US sanctions on Iran approachesDr. Mohamed Ramady
All said and done, President Trump was an exceptionally influential factor in the OPEC deliberations, much to Iran’s annoyance. The OPEC countries were no doubt thankful Trump’s threatening tweets during their Vienna meeting were aimed at the Germans and the European Union. This Trump factor drew nearly as much attention in the both the meeting itself and on the sidelines as the actual agreement. It is widely understood, for instance, that some countries put the one million figure into the media primarily to deflect or at least delay public tweets or comments by President Trump during the OPEC meeting that would have seriously undermined the fragile consensus that Saudi and Russian officials , who were pushing for a higher level of 1.5 million bpd , were struggling to pull together.